Will a Smaller Wal-Mart Win Over New York City?

Despite opposition from New York City’s unions, residents, and politicians who say Wal-Mart (NYSE:WMT) would devastate local businesses, and despite the halt of its latest attempt to open its first store in the city, the world’s largest retailer may avoid restrictions by opening smaller-format stores in key neighborhoods.

Wal-Mart announced today that it failed to agree on economic terms for the development of the company’s first store in Brooklyn’s East New York neighborhood. Political and grassroots opposition is not new for Wal-Mart; the retailer was was denied locations in Queens and Staten Island in recent years. However, several of its competitors, like Target (NYSE:TGT) and Costco (NASDAQ:COST), already have opened stores the city.

A statement released on the company’s website by Wal-Mart Senior Director of Community Affairs, Steven Restivo, said the company would continue to evaluate locations across all five boroughs.

“We remain committed to bringing new economic development and shopping options to New York City, especially in the neighborhoods that need them most,” he said. “Two things remain constant: most New Yorkers want us here and we remain interested in providing more convenient access to Walmart for local residents.”

The stream of opposition and anti-Wal-Mart sentiment that has blocked the company’s expansion in New York focused on the fear of job loss. A January 2010 study, written by two Hunter College professors and published by the Center for Community Planning and Development for the New York City Public Advocate’s Office, maintains that for every two jobs Wal-Mart creates, three others will be lost.

Wal-Mart faced similar union opposition opening its first stores in Chicago last year. To win over the unions, the retailer divided the city’s labor movement by agreeing to use union labor for constructing the stores, but not in operating them.

For its campaign in New York City, Wal-Mart has begun a local website devoted to highlighting company data that supports its mission. Its findings show that Wal-Mart stores will help the poorer New Yorkers save on grocery bills and claim that Hunter’s study is incorrect.

The company’s current strategy for expanding into New York steers away from the original 195,000 square-foot stores of suburban America. Rather, Wal-Mart plans to develop smaller-format stores, of 20,000 square feet, similar to Wal-Mart’s Neighborhood Market style store.

A new study, compiled by Quinnipiac, shows that Wal-Mart may have an opening in the city after all: 63 percent of voters said the retailer should be allowed in New York, even though 50 percent think they don’t pay their workers enough, and while 70 percent think Walmart would hurt small businesses, 69 percent said they would shop at Walmart if they could.